HomeMy WebLinkAboutA002 - Memo from Mary Greeley dated May 6, 2003 - Overview of Series 2003 Refunding Bonds JEMD L
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IC L CANTER
To: Mayor Tedesco and Members of Ames City Council
From: Kim Russel, Mary Greeley Medical Center CEO
Brian Dieter,Mary Greeley Medical Center CFO
Date: May 6, 2003
RE: Overview of Series 2003 Refunding Bonds
At the City Council meeting Tuesday, May 13, 2003, we will present an overview of the opportunity to
refinance Mary Greeley Medical Center's existing long term debt. This refunding will provide the
Medical Center significant present value savings. A summary of the Medical Center's current
indebtedness follows:
The Series 1992 Bonds, currently outstanding in the amount of$8,220,000, were originally issued in
the amount of $21,000,000 with principal payment dates of August 15, 1993 through 2009. The
purpose of the Series 1992 Bonds was to refund the City's Series 1979 and Series 1986 bond issues and
to fund routine capital expenditures of the Medical Center. The Series 1992 Bonds were insured by
Ambac, and will be called on August 15, 2003 at a price of 101%.
The Series 1993 Bonds, currently outstanding in the amount of$24,000,000, will be called on August
15, 2003 at a price of 102%. The Series 1993 Bonds were originally issued in the amount of
$24,000,000 with principal payment dates of August 15, 2007 through 2022. The purpose of the Series
1993 Bonds was to fund the reconstruction and expansion of the Medical Center's northwest building,
construction of the Medical Center's west addition, and to secure land for and construct a parking
structure. The Series 1993 Bonds were insured by Ambac.
The Series 2003 Bonds will be issued in a principal amount not to exceed $37,000,000 (current estimate
approximately $34,500,000). The Series 2003 Bonds will be issued to take advantage of current
historically low interest rates to refinance the outstanding Series 1992 and 1993 Bonds (the "Refunded
Bonds") for debt service savings. The proceeds of the Series 2003 Bonds, which are expected to be
delivered in June, will be placed into an irrevocable escrow account and will be used to prepay the
Refunded Bonds on their call dates. The Series 2003 Bonds will have a final maturity 2022, which is
the same as the Refunded Bonds. Proceeds of the Series 2003 Bonds will also be utilized to fund a
Debt Service Reserve Fund and pay costs associated with the issuance of the bonds, including a bond
insurance premium. This transaction will replace all of the Medical Center's long term bond related
debt.
The Series 2003 Bonds are expected to be issued as fixed-rate bonds. Discussions are well underway
with Ambac to provide "AAA"rated bond insurance on the Series 2003 Bonds, and all indicators from
Ambac lead us to believe their commitment for insurance will be forthcoming immediately. Ambac is
the most likely bond insurer for this financing as they insured the Series 1992 and 1993 Bonds, as well
as being the #1 insurer of healthcare revenue bonds. The Series 2003 Bonds do not constitute a general
obligation of the City of Ames, and are payable solely from net revenues of the Medical Center, which
is exactly the same basis under which the 1992 and 1993 Bonds were issued.